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Business Segment Reporting
 12 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
Business Segment Reporting
Note 25 — Business Segment Reporting
Our business segments reflect the internal reporting that we use to evaluate operating performance of services and to assess the allocation of our resources. A brief description of our current business segments is as follows:
Servicing. This segment is primarily comprised of our core residential servicing business. We provide residential and commercial mortgage loan servicing, special servicing and asset management services. We earn fees for providing these services to owners of the mortgage loans and foreclosed real estate. In most cases, we provide these services either because we purchased the MSRs from the owner of the mortgage, retained the MSRs on the sale of residential mortgage loans or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Our residential servicing portfolio includes conventional, government insured and non-Agency loans. Non-Agency loans include subprime loans which represent residential loans that generally did not qualify under GSE guidelines or have subsequently become delinquent.  
Lending. The Lending segment is focused on originating and purchasing conventional and government insured residential forward and reverse mortgage loans mainly through our correspondent lending arrangements. We also commenced a direct lending business to pursue refinancing opportunities from our existing portfolio, where permitted. The loans are typically sold shortly after origination into a liquid market on a servicing retained basis.
Corporate Items and Other. Corporate Items and Other includes items of revenue and expense that are not directly related to a business, business activities that are individually insignificant, interest income on short-term investments of cash, corporate debt and certain corporate expenses. Business activities that are not considered to be of continuing significance include subprime loans held for sale (at lower of cost or fair value), investments in unconsolidated entities and affordable housing investment activities. Corporate Items and Other also included the diversified fee-based businesses that we acquired as part of the Homeward and ResCap Acquisitions and subsequently sold to Altisource.
We allocate interest income and expense to each business segment for funds raised or for funding of investments made, including interest earned on cash balances and short-term investments and interest incurred on corporate debt. We also allocate expenses generated by corporate support services to each business segment.
Financial information for our segments is as follows:
 
Servicing (1)
 
Lending
 
Corporate Items and Other
 
Corporate Eliminations
 
Business Segments Consolidated
Results of Operations
 
 
 
 
 
 
 
 
 
For the year ended December 31, 2013 (As Restated)
 
 
 
 
 
 
 
 
 
Revenue (2) (3)
$
1,895,921

 
$
120,899

 
$
22,092

 
$
(639
)
 
$
2,038,273

Operating expenses (2) (4)
1,096,084

 
98,194

 
107,188

 
(172
)
 
1,301,294

Income (loss) from operations
799,837

 
22,705

 
(85,096
)
 
(467
)
 
736,979

Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
1,599

 
16,295

 
4,461

 
—

 
22,355

Interest expense (1)
(381,477
)
 
(13,508
)
 
(601
)
 
—

 
(395,586
)
Other (2) (3)
(28,292
)
 
10,132

 
6,424

 
467

 
(11,269
)
Other income (expense), net (1)
(408,170
)
 
12,919

 
10,284

 
467

 
(384,500
)
Income (loss) before income taxes (1)
$
391,667

 
$
35,624

 
$
(74,812
)
 
$
—

 
$
352,479

 
 
 
 
 
 
 
 
 
 
For the year ended December 31, 2012
 
 
 
 
 
 
 
 
 
Revenue (2) (3)
$
840,630

 
$
356

 
$
5,122

 
$
(905
)
 
$
845,203

Operating expenses (2) (4)
344,315

 
409

 
19,667

 
(484
)
 
363,907

Income (loss) from operations
496,315

 
(53
)
 
(14,545
)
 
(421
)
 
481,296

Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
9

 
309

 
8,011

 
—

 
8,329

Interest expense
(221,948
)
 
(514
)
 
(993
)
 
—

 
(223,455
)
Other (2) (3)
(13
)
 
—

 
(9,070
)
 
421

 
(8,662
)
Other income (expense), net
(221,952
)
 
(205
)
 
(2,052
)
 
421

 
(223,788
)
Income (loss) before income taxes
$
274,363

 
$
(258
)
 
$
(16,597
)
 
$
—

 
$
257,508

 
 
 
 
 
 
 
 
 
 
For the year ended December 31, 2011
 
 
 
 
 
 
 
 
 
Revenue (2) (3)
$
494,834

 
$
—

 
$
2,346

 
$
(1,289
)
 
$
495,891

Operating expenses (2) (4) (5)
231,201

 
—

 
8,971

 
(625
)
 
239,547

Income (loss) from operations
263,633

 
—

 
(6,625
)
 
(664
)
 
256,344

Other income (expense):
 

 
 

 
 

 
 

 
 

Interest income
110

 
—

 
8,766

 
—

 
8,876

Interest expense
(132,574
)
 
—

 
(196
)
 
—

 
(132,770
)
Other (2) (3)
4,711

 
—

 
(14,830
)
 
664

 
(9,455
)
Other income (expense), net
(127,753
)
 
—

 
(6,260
)
 
664

 
(133,349
)
Income (loss) before income taxes
$
135,880

 
$
—

 
$
(12,885
)
 
$
—

 
$
122,995

 
Servicing
 
Lending
 
Corporate Items and Other
 
Corporate Eliminations
 
Business Segments Consolidated
Total Assets
 

 
 

 
 

 
 

 
 

December 31, 2013
$
6,295,976

 
$
1,195,812

 
$
435,215

 
$
—

 
$
7,927,003

 
 
 
 
 
 
 
 
 
 
December 31, 2012
$
4,575,489

 
$
476,434

 
$
634,039

 
$
—

 
$
5,685,962

 
 
 
 
 
 
 
 
 
 
December 31, 2011
$
4,301,371

 
$
—

 
$
426,653

 
$
—

 
$
4,728,024

(1)
As discussed in Note 1A — Restatement and Revision of Previously Issued Consolidated Financial Statements, we are restating our previously issued audited Consolidated Financial Statements as of December 31, 2013 and for the year then ended to correct an error in applying the interest method to financing liabilities in connection with Rights to MSRs sold to HLSS. Interest expense on the HLSS Transaction financing liabilities for the year ended December 31, 2013 has been restated.
(2)
Intersegment billings for services rendered to other segments are recorded as revenues, as contra-expense or as other income, depending on the type of service that is rendered.
(3)
Servicing has a contractual right to receive interest income on float balances. However, Corporate controls investment decisions associated with the float balances. Accordingly, Servicing receives revenues generated by those investments that are associated with float balances but are reported in Corporate Items and Other. Gains and losses associated with corporate investment decisions are recognized in Corporate Items and Other.
(4)
Depreciation and amortization expense are as follows:
 
Servicing
 
Lending
 
Corporate Items and Other
 
Business Segments Consolidated
For the year ended December 31, 2013:
 

 
 

 
 

 
 

Depreciation expense
$
13,525

 
$
320

 
$
10,400

 
$
24,245

Amortization of MSRs
282,526

 
255

 
—

 
282,781

Amortization of debt discount
1,412

 
—

 
—

 
1,412

Amortization of debt issuance costs – SSTL
4,395

 
—

 
—

 
4,395

 
 
 
 
 
 
 
 
For the year ended December 31, 2012:
 

 
 

 
 

 
 

Depreciation expense
$
1,469

 
$
8

 
$
4,243

 
$
5,720

Amortization of MSRs
72,897

 
—

 
—

 
72,897

Amortization of debt discount
3,259

 
—

 
—

 
3,259

Amortization of debt issuance costs – SSTL
3,718

 
—

 
—

 
3,718

 
 
 
 
 
 
 
 
For the year ended December 31, 2011:
 

 
 

 
 

 
 

Depreciation expense
$
2,410

 
$
—

 
$
1,750

 
$
4,160

Amortization of MSRs
42,996

 
—

 
—

 
42,996

Amortization of debt discount
8,853

 
—

 
—

 
8,853

Amortization of debt issuance costs – SSTL
9,764

 
—

 
—

 
9,764


(5)
Operating expenses for 2011 include non-recurring transaction-related expenses associated with the Litton Acquisition of $50.3 million recorded in the Servicing segment.